Will downsizing boomers change urban housing for the better?

As the baby boomers exit the single-family housing market in cities, what will happen to prices and neighbourhoods?

Journalist Gary Mason offers a few thoughts in today’s Globe and Mail:

In a 2008 paper co-written with Sung Ho Ryu, Prof. Dowell Myers said communities in the United States face a historic tipping point. The ratio of seniors to working-age residents is expected to grow by roughly 30 per cent in each of the next two decades, the pair calculated….

Those wanting to enter the market in the coming years may not have the money to buy single-family detached homes, either. Thus the dilemma: Who will boomers sell to when they’re ready to move into some swank condo downtown or on a golf course somewhere?

This could actually be good news for young people. An oversupply of homes generally means prices fall. But as home values decline, so will home equity, diminishing retirement savings in the process. Home equity is the single largest component of net wealth for most people.

Today, Prof. Myers [is] anticipating another recession in the latter half of this decade, and that’s when the crisis he’s predicting will reveal itself. “Recoveries are usually fuelled by people who postponed buying a home who are now surging into the market. I just don’t see there being enough buyers for all those selling. I think this is going to be bad for house prices, public finance and global treasuries.”

Tsur Somerville, [of UBC Sauder School of Business], isn’t as pessimistic as Prof. Myers.

“I know it’s one of those theories where the numbers add up and the underlying fundamentals are correct, but I think in Canada, at least, it’s too early to say how it’s going to play out. I think immigration is the key. … The places that need to worry are those cities with an aging profile that don’t have big net immigration numbers and are seeing their young move to other places,” said Prof. Somerville. “I think there are some centres that fit that description that maybe should be worried. But there’s lots of ways this could play out yet.”

I agree that some suburbs may see values fall as younger generations are less interested in–or able to afford–living in more isolated areas that require a long automotive commute to major employment centers.  This could really hit some US metro areas.

But in cities where boomers own much of the older single-family housing closer to employment centers, or along transit lines, a wave of selling combined with rezoning to higher density use might actually accelerate a shift toward more sustainable urban living.  For example, an older rancher could become two or more homes as it is replaced by a duplex or by two detached homes–or two duplexes–on a subdivided lot.

Such a shift would potentially keep housing prices in check for younger generations–four homes in the same space as one.  It would also increase density, which allows for more retail, service and even transit amenities.  And finally, such a shift might actually help maintain property values for the aging boomer since the land value would reflect a “higher and better use” on the site.

Your thoughts?


  1. Lloyd Alter says:

    Gary Mason writes:

    “The first wave of baby boomers reach 65 this year. The last of this generation is scheduled to breach that threshold in 2029. We all know about the demographic monster the boomers represent – a generation that far exceeds, size-wise, anything coming up behind it.”

    1) the baby boom in canada is five years behind the states because of differences in the postwar economies. We are younger and it is not going to happen as quickly.

    2) the trend, at least in Toronto, is to renovate duplexes and triplexes back to single family houses. The development pressures that are creating new condos downtown increase the value of the single family house, not decrease it; the supply is diminishing.

    3) Generation Y is bigger than the baby boom; there are 9.2 million of them in Canada, and notwithstanding your wonderful study that said that they want to live downtown town, As they enter childbearing age a LOT of them are going to want to live in houses if they can afford it. There will be a lot of money chasing a diminishing supply of single family houses; that makes prices go up, not down.

    I suspect that the boomers will be cashing out in smaller numbers than you think. Their houses are paid off and they want to stay in areas that they know. (my mother in law won’t leave her suburban sidesplit that she rattles around alone in) After many years of marriage couples want their distance. (I want to cash out and move on top of the new TIFF movie theaters in Toronto and my wife says there is no way she is sharing a teensy apartment instead of a three storey home).

    Mason asks “: Who will boomers sell to when they’re ready to move into some swank condo downtown or on a golf course somewhere?”; he is looking in the mirror and not at the reality of housing in the City, where many people are older working class and middle class, have kids who never leave or come back, and who don’t play golf. He is talking of a very small proportion of homeowners. But then he writes for the Globe and Mail.

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  3. Wendy Waters says:

    Hi Lloyd,

    Thanks for the detailed response.

    My gut is that you’re right in your comment that boomers will not be cashing out soon. Many if not most will stay in their homes as long as they can for the reasons you suggest and more. I expect it will be more of a slow, gradual trend, which gives communities time to think about how to manage the change. But, at some point, mortality will catch up with this generation so they will vacate their homes, just perhaps not for 20-30 years!

    I disagree on a couple other points.

    First, generation Y in Canada is smaller than the boomers (the US has an echo boom, however). Check out The Urban Futures Institute graph on page 7 of this report: http://www.urbanfutures.com/reports/Report%2074.pdf

    However, if you add up Gen X, Gen y and whatever we’ll call Gen Z, which include a lot of immigrants, then we’re probably reaching a comparable population, which will help housing. Perhaps this is your point?

    Second, not every neighbourhood is, or will be zoned, for high rise condos. Some will keep their historic, ground-oriented character. Adding additional density through subdivision or duplexes is one option that will make it more affordable than otherwise to live at ground level rather than in a high rise (more choices).

    Good discussion….

  4. Lloyd Alter says:

    When I look at that Urban Futures graph I see not too many 65 year olds, a peak of 45 year olds and a whole lot of younger people following.

    In the end though I think we both agree, Gary Mason doesn’t know what he is talking about, and is certainly not representative of the population.

  5. Wendy Waters says:

    The Urban Futures graph is with 2008 data, I believe, so you’d need to look at the 62 or 63 year olds line to see the leading edge of the boomers.

    I think Gary raised some excellent questions and a challenge. The challenge for anyone thinking about longer term planning policy or development/investment strategy is that many boomers talk like Gary. They bring up the idea of selling their homes, of downsizing, of living a different lifestyle but then don’t follow through. It’s more of a dream than a plan. But, some investors or policy makers are thinking that the dream could come true on a massive scale. Like you, I’m skeptical of this, but am searching for evidence one way or the other.

    In some survey work we did for the 21st Century Apartment Trends report, a significant number of people only changed their housing following a major lifestyle changing event–like the death of, a spouse, for example, or a divorce or a (new) marriage.

    Something has to “shake up” the status quo before people actually move, typically.

    So, until that happens to each boomer couple, they are unlikely to move. That’s my theory at the moment, anyway.

  6. Seems to me that, as the boomers retire, they’ll place a large number of larger homes on the real estate market. This should depress the price of larger homes for perhaps two decades. Bill

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